Next, please

Next's best shopping days could be behind it

The heat is on UK retailers. Next, the British clothing chain whose share price has tripled over the past five years, is starting to wilt.

Unseasonably warm winter weather is the biggest factor behind Next's unusually weak January 5 update. The company said Britain was as much as four degrees centigrade hotter in its 2015 pre-Christmas period, compared to 2014. Yes, retailers are prone to using the weather as a lame excuse for poor trading. In this case, it is plausible that demand for biggish-ticket items such as winter coats would be hit.

Unlike some peers, Next did increase sales pre-Christmas. Even so, the 0.4 per cent bump is paltry by this retailer's own high standards. Next saw sales rise 2.9 per cent last time around. In the similar November-December period of 2013, Next sales rose 11.9 per cent. Rival Marks & Spencer, due to update investors on January 7, will show whether this was part of a wider trend.

What's more, the largely online Next Directory home shopping business is slowing down. Weather, in part, is to blame for that too. But it is disappointing to see Next only grow revenue in that part of its business by two per cent. Two years ago, pre-Christmas Directory sales were up 21 per cent.

Next admitted that its own misjudgements exacerbated weather worries in the Directory side of the business. It failed to stock enough of some popular lines. Like the weather, that problem may come right quite quickly. But Next Directory's sales account for around 38 per cent of the total across the whole of Next's last financial year and 46 per cent of operating profit. It probably gives Next its best hope of getting back on track.

The shares trade at 16 times forward earnings, a premium to the sector median which, according to Eikon data, is 14. That is partly down to Next's determination to avoid discounting. But it has to grow if it is to produce anything approaching the kind of share price performance it has achieved in recent years. That means giving shoppers more for their money, and being prepared to cut prices.